The Coalition’s energy efficiency “revolution” is due to begin in just six
months’ time. Yet industry experts still doubt whether the Green Deal can
deliver on its ambitious aims.

Unveiled in 2010, the scheme was to be “a once-and-for-all refit”, making “every home in Britain ready for a low-carbon future”. The idea was simple: a company pays to install efficiency measures such as insulation in a home; the consumer repays them out of the resulting savings on their energy bills.

If it proves popular, ministers believe the Green Deal could benefit millions of homes, creating 100,000 supply­chain jobs in five years.

Yet if uptake is low, the Government’s own climate change adviser, Lord Adair Turner, has warned it “would be problematic given the need to insulate lofts and cavity walls to meet carbon budgets, and to mitigate energy bill impacts from investment in low carbon power generation”.

Many in the industry fear demand will indeed be low – leaving consumers in draughty homes with energy bills rising ever more steeply. Their concerns are informed by the recent experience of the Big Six suppliers in promoting efficiency to try to meet Carbon Emissions Reduction Targets (CERT) – under the threat of fines if they do not. Insulation has been given away heavily subsidised, or even for free.

Sara Vaughan, E.ON’s director of energy policy, says that while the supplier expects to meet its CERT obligation, “the low-hanging fruit has been picked so it is more difficult to get the remaining consumers to sign up for insulation”.

The challenge for the Green Deal will be to “spark excitement” – to align itself with ‘home improvement’ rather than ‘green’ ideals. She says there needs to be a change in public attitudes akin to that seen with recycling. “I’m not saying it will be easy but I don’t think the Government has a choice. The timing may be ambitious but whether we do it by 2014 or 2018, the important thing is that we do it.”

But doubts remain over how this demand can be created, given consumers may not see any financial benefit until their Green Deal loan is paid off.

A source close to one major supplier says: “The biggest question mark is still the idea that people will take out fin­ance arrangements for some of these things when you can’t give them away for free.”

Ministers hoped demand could be bolstered by enlisting retailers such as Marks & Spencer and Tesco as Green Deal providers. But eyebrows were raised last week when ministers signed a “watershed” memorandum of under­standing with 22 providers; absent from the list were not only those retailers, but also three of the Big Six energy suppliers.

The Department of Energy and Climate Change (DECC) says the names are merely the first tranche and it is “confident that the Green Deal will be a success”. DECC is “doing a lot to ensure there is dem­and”: £200m has been allocated to drive early take-up; landlords will be forced to make rented properties more efficient; and other regulation could see a variety of home improvements trigger compulsory efficiency work. A sister scheme, the Energy Company Obligation (ECO), will require suppliers to subsidise work on harder-to-treat walls and for vulnerable customers.

But demand is not the only concern. Darren Braham of supplier First Utility says his company is still in talks with DECC over how the Green Deal and ECO will be applied. Thresholds proposed for the schemes would, he says, make it financially disadvantageous for First Utility to expand ­beyond 125,000 customers – des­pite ministers’ wish to ­encourage small suppliers.

Mr Braham also questions whether a Green Deal, involving several companies and interest rates of about 6pc, will offer a better deal than existing insulation firms. “The danger is you are adding a whole layer of cost,” he says.

Others foresee difficulties with the “Golden Rule” – the principle that efficiency savings will be greater than Green Deal payments. The rule is calculated on the savings an average energy user would make in a home; its occupiers will also receive a personal esti­mate of how much they would actually save before taking out a deal. But the deal then stays with the property.

“If you have people moving between properties, you inherit a Green Deal you didn’t set up in the first place and you have different consumptions,” Tom Pering, energy market analyst at Inenco, says. “It will be difficult to judge how much saving has really been made.”

This could, some suggest, complicate buying and renting homes with Green Deals.

Steven Heath of Knauf Ins­u­lation highlights worries that IT systems to manage Green Deal payments will not be ready in time; ministers have already begun referring to the October launch as a “managed” or “soft” start.

DECC insists there will be a “smooth transition” from current subsidised schemes to the Green Deal but, if not, Mr Heath fears manufacturers could be hit as there will be “no-one installing insulation”. He thinks the Green Deal can work in the long term. But he warns: “If confidence is lost in the early days, that could be the Green Deal lost.”